2005-03-29                     House Journal                      Page 0761
HB 235                                                                                            
HOUSE BILL NO. 235 by the House Rules Committee by request of                                       
the Governor, entitled:                                                                             
                                                                                                    
     "An Act excepting from the Alaska Net Income Tax Act the                                       
     federal deduction regarding income attributable to certain                                     
     domestic production activities; and providing for an effective                                 
     date."                                                                                         
                                                                                                    
was read the first time and referred to the House Special Committee on                              
Ways & Means and the Finance Committee.                                                             
                                                                                                    
The following fiscal note(s) apply:                                                                 
                                                                                                    
1.  Indeterminate, Dept. of Revenue                                                                 
                                                                                                    

2005-03-29                     House Journal                      Page 0762
The Governor's transmittal letter dated March 22, 2005, follows:                                    
                                                                                                    
"Dear Speaker Harris:                                                                               
                                                                                                    
Under the authority of art. III, sec. 18, of the Alaska Constitution, I am                          
transmitting a bill excepting from the Alaska Net Income Tax Act the                                
federal deduction regarding income attributable to certain domestic                                 
production activities.                                                                              
                                                                                                    
Last year Congress passed legislation (American Jobs Creation Act of                                
2004) that created a new federal tax deduction for corporations                                     
regarding income attributable to certain domestic production activities.                            
Alaska tax law automatically adopts such federal tax deductions unless                              
the Legislature explicitly excepts to them (AS 43.20.021(a)).  Because                              
of Alaska's unique reliance on natural resource development, this                                   
particular deduction will have major impacts on the state's revenue                                 
flow.  The Department of Revenue estimates that this federal tax                                    
deduction could cut $100 million from state corporate income tax                                    
revenue over the next decade.                                                                       
                                                                                                    
With the passage of this legislation, Alaska's corporate income tax                                 
structure will stay the same as it is under the current regime.  This will                          
provide continued stability and tax certainty to corporations operating                             
in the State of Alaska.                                                                             
                                                                                                    
Several other states also have introduced legislation to "de-couple"                                
their tax code from this new federal provision, including Montana,                                  
New Jersey, Maryland, North Dakota and West Virginia.                                               
Massachusetts has enacted such legislation.                                                         
                                                                                                    
I urge your prompt and favorable action on this measure.                                            
                                                                                                    
                                Sincerely yours,                                                    
                                /s/                                                                 
                                Frank H. Murkowski                                                  
                                Governor"